News


Forex news for New York trade on March 6, 2020:

Markets:

  • S&P 500 down 51 points to 2972
  • Gold up $2 to $1673
  • US 10-year yields down 13 bps to record low close at 0.78%
  • WTI crude down $4.31 to $41.59
  • NZD leads, CAD lags

The
main story in FX on Friday was the continued and ongoing drop in the US
dollar. That was a byproduct today of the massive rally in Treasuries,
dropping yields to all-time lows. That sparked a huge unwind in carry
trade with money flowing back out of dollars. Only the loonie weakened
more than the dollar (and only barely) and that was with a nearly 10%
drop in the price of oil.

Crude crumbled as
OPEC+ appeared to dissolve. Russia refused to pitch in on output cuts
and the rest of OPEC refused to participate without them. Despite some
attempts at positive spin, that’s a disaster for the cartel and there is
no agreement beyond March. In theory, more production could come online
at the end of the month despite massive demand destruction.

On
the virus, there wasn’t any particularly surprising headlines. The
numbers continue to rise quickly in Italy and the rest of Europe doesn’t
seem far behind. There are some troubling videos trickling out of Iran
about a horrible situation there in the hospitals. Airlines are warning
of dramatically lower demand.

Late in the day,
Treasury yields came off the extreme lows led by the front end and that
eased some of the fears elsewhere. The rally in stocks late in the day
looked like short covering and gold was whipped around before finishing
fractionally higher.

FX remains relatively
stable but volatility is like coronavirus — it’s spreading and it’s
only a matter of time until the ranges widen in the currency market and
we see some truly spectacular moves. Have a safe weekend and be sure to
wash your hands.



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